Not Getting Real - Yet

  • Abhishek Behl / FG
  • India
  • Aug 24, 2012




The Gurgaon Real Estate market is a complex animal. It does not follow the simple rule of demand and supply; prices keep on increasing - irrespective of an economic slowdown, higher interest rates, low absorption, or an oversupply of property that no one in the industry admits to. To understand why realty in the Millennium City defies gravity, and why it is beyond the purview of business cycles, Friday Gurgaon on Monday invited eminent practitioners of this trade for a Panel Discussion.


Gurgaon I (Sectors 1 to 57) today boasts of top rates – Rs 25,000 per sq ft price for a top apartment; Rs 250,000 per sq yd price for a top plot; and Rs 125 per sq ft rent for a top office.

Sanjay Sharma, MD, Qubrex, who started the discussion, said that the Real Estate market in Gurgaon was different from other cities, in the sense that is primarily investor driven. “Even if you have Rs 20 lakh in the pocket, a broker will motivate you to invest in property, promising huge returns. There is no rationalisation in the market, and this creates a certain pressure on the builder to hike prices – artificially, in stages”, said Sharma. He further said that he has rarely seen a builder reduce prices.

Devinder Gupta, CEO DGS Reality, who has seen Gurgaon since the beginning, asserted that there have been instances where builders have reduced prices, to push sales; or, understanding the reality of the market, offered more sops to the buyers - to ensure that takeoff did not stagnate. He also admitted that Gurgaon was an investors market, that was primed to ensure that prices went up; and increasingly more people were putting their money in realty. Another important observation by the experts was the increase in speculation in plots, as compared to apartments - where there were more end-users. Rajan Chanana, a Consultant, said that the prime objective of every stakeholder was to ensure that the industry keeps rolling.

When asked by the Editor, Friday Gurgaon, who moderated the discussion, to identify the profiles of customers, Jayashree Kurup, Head, Content and Research, Magic Bricks, said that the majority were repeat buyers. “Gurgaon today is affordable to only repeat buyers, who have already made money. They will later sell to the first-time buyers and the end-users”, said Kurup. Most end-users end up buying the property in the third cycle. As far as the origin of buyers is concerned, experts observed that 40 per cent of the buyers were from outside Gurgaon, including those from other Indian states and NRIs; while the remaining 60 per cent were from the City. “Money is coming from all over the world, and this will continue, as the returns have been great”, they averred.

Not only investors, but experts also opined that the demand in Gurgaon had matured, to the extent that buyers were more interested in buying lifestyles than houses. “People today want to buy made-to-order villas, apartments and houses, that cater to an international lifestyle and taste. Money is secondary”, said Rakesh Goel, Vice President, Ansals API. While five years ago the builders were giving basic facilities to the buyer, now the scenario has changed immensely, confirmed Goyal. Sonia Vaid, a real estate professional and researcher, opined that excess black money in the real estate industry was also a factor, that always kept on pushing up the prices. “There is an apartment economy and a plot economy; the first is a bit more regulated by cheque transactions, the latter has more proportion of cash transactions”, she said. Circle rates are only 30 to 40% of the actual rates.


Rajan Chanana            Rakesh Goel                 Dr. Devinder Gupta      Sonia Vaid

While both the buyers and experts have great expectations from the residential sector, the commercial real estate is considered to be a tricky proposition. Prashant Dhar, General Manager, Marketing DLF, opined that his Company preferred to have a healthy mix of investors and end users in both segments. “Every builder will like the malls and offices to be filled by end users. Gurgaon realty is based on cycles, and it inspires an investor mentality, as everyone expects there will always be a buyer at a higher rate”, he asserted. Sharma of Qubrex opined that Commercial real estate in Gurgaon is a different ball game altogether, with some assured returns scheme almost a scam waiting to explode. “However, the real estate prices in the commercial segment have risen within the averages, and are not substantial”, he said. The experts were also concerned over the lopsided dispersion of the commercial property in the City, which often accentuates the infrastructure problems. Manish of CBRE, who also tracks overall space diligently, feels that the absorption is low in the commercial space.


   Dr. Sanjay Sharma       Jayashree Kurup            Manish Kashyap          Sam Chopra


Slowdown in the realty market: The issue of a slowdown in the Real Estate market elicited the sharpest remarks among the panelists. Many of them supported the contention - while some argued that it was mostly an issue of perception (even stating that this was due to summertime, a slow period). When the moderator mentioned that there was a report of a 40 per cent decline in absorption of properties as compared to last year (Q1), Devender Gupta contended that this was an impossible scenario. “I can sell any number of properties, as the market has the ability to absorb the supply. The impact was more on Delhi, as some ‘expensive’ Delhi areas (like New Friends Colony) were not able to command high prices now. A slowdown in the market also affects the end-user more as compared to the investors, as the latter always have the money ready for making the bets”, said Gupta, while discounting the slowdown theory. The market may hold up the prices and the sale of properties for a couple of months, or the prices may even go down - but they will always come back to a threshold level, asserted Gupta. For him, even a stagnant market was welcome. “I enjoy to work in such a market, as competitors are less”, he said. Jayshree Kurup of Magic Bricks also opined that slowdown in real estate is more of perception as there is huge unmet demand. As soon as prices hold up, there are a number of new buyers and end users who jump into the housing bandwagon, and push realty. Whenever the market in Gurgaon slows down, there is push to realty in Dharuhera, Bhiwadi, and Manesar. She also sees that in India there is a cycle of buying in a year – starting with Kerala; and heavily influenced by ‘shradh’ periods all over.


Annil Bedi                             Prashant Dhar

However, Sam Chopra, CEO Remax, who all along had been listening with rapt attention, made a forceful intervention on the issue, saying that the ever rising-market in Gurgaon was creating a bubble like situation in the City. “The bullish market is being sustained by the parallel economy, and in the past couple of months less money is coming into Real Estate”, said Chopra. He admitted that there was a general slowdown caused by the general conditions in the economy, lesser international business and trade, hiccups in the IT sector, and less corporates coming into Gurgaon. He agreed that money is flowing from other sectors and states to Gurgaon. During the 2008-09 slowdown, the industry was saved by the government, as it made it easy for builders to get money from banks; now it has made borrowing easier for buyers - so in both ways the realtor is getting help, he said. “Price rigging is constant and perpetual. It will not stop unless black money into this Sector is not checked”, he asserted.

Manish Kashyap, Director, Transactions Management Services, CBRE, also agreed that there was a general slowdown in the market, as the number of deals had decreased. Also, rentals have increased. But he pointed out that a 40 per cent reduction was difficult to accept. Kashyap also cited that a number of companies were relocating from Gurgaon to lower cost destinations, as the City had become expensive. In his opinion, the various subvention schemes launched by builders were only another way of accepting this reality, and ultimately the builders had to pick the up bills. Chanana also said that subvention schemes launched by the banks were being used by many investors to buy multiple properties. They are perfect for helping in speculation, and this is happening in the market”, he said.

Annil Bedi felt that the demand has been propped up with funds coming from a lot of rich clients from smaller towns across India – especially those impacted by Maoist threats. They have propped up some of the newer builders.

Summing up the issue, the experts observed that Gurgaon was a special case in the realty market, and it would take some special reasons for it to slow down.

Gurgaon I versus Gurgaon II : While Gurgaon Ii (Sectors 58 to 115), comprising areas around Golf Course Extension Road, Southern Peripheral Road and Dwarka Expressway, is coming up in a big way, it has not yet caught the fancy of ‘brokers. 

Yes, some demand has picked up, ever since Gurgaon I prices went beyond Rs 6,000 per sq.ft. The majority of the panelists gave a minimum 10-year time frame for this area to take the shape of a parallel city – real buyers will come only after 3-4 years. Annil Bedi, of Apollo Realtors, opined that it had taken almost 25 years for the present Gurgaon to transform itself into a Millennium City; and despite technological improvements, it will take minimum half the time for this new area to develop an eco-system of its own. Even today Gurgaon is known as a 7/24 (7 hours a day) City, for water and electricity. Also, there is skepticism whether this new land bank can effectively accommodate the further 20 lacs population expected.

The builders too are not unhappy with the delay, given the lukewarm response, to date, for many properties. However, the area is being developed better than Gurgaon I, with early builders developing roads etc. (as part of a PPP with HUDA) that will be of benefit to multiple builders. 

Manish Kashyap of CBRE opined that Gurgaon had become the southernmost colony of Delhi, and had greatly built on that advantage. Many people from Dwarka and adjoining areas would like to shift to Gurgaon, as it also has become the corporate capital of India - generating employment in IT, auto and realty. This will boost the prospects of Gurgaon II.

Sanjay Sharma of Qubrex was of the opinion that with most of Gurgaon II still awaiting basic infrastructure, it was better to stay invested in the existing areas, where there is a developed eco-system. “We are asking our clients to invest in ready-to-move-in properties, as a large number of projects in Gurgaon II are under construction (or proposed to be built)”, he said. With builders not coming good on promises, and delaying the construction due to different reasons, the end-user, he says, will have to look at a time frame of 5 to 6 years. Chanana however said that properties along Golf Course extension road in Gurgaon II are a better bet - as delivery is promised within the next 2 years, and most of the projects are high-end.

Dishing out a number of statistics, Sanjay Sharma said that it is expected that one lakh and fifty thousand new apartments will be constructed in Gurgaon II by 2015. “This, he said, was a very large supply, and it would need a large number of end users to come in - as presently most of the buyers were investors, having a stake in multiple properties”, he informed.

Rakesh Goyal of Ansal API, however, opined that Gurgaon II is a City with a Plan, and a proper scheme has been laid out for builders to develop on. “The size of the roads has been increased, the drainage and sewerage networks have been given proper thought, the power and water lines have been envisioned, and norms laid as to what a developer can do and what he cannot”, he said. Goyal further said that government departments were also very clear as to what needs to be done in Gurgaon II, and it seems that some learning has taken place. He also said that most of builders in Gurgaon II are offshoots of the major builders of Gurgaon I.

Another bone of contention in Gurgaon II is land acquisition, as farmers are not ready to part with their land, especially now that prices have increased exponentially, said Kashyap. Sharma said that the tendency of the courts to favour the landowners would also have to be handled carefully, for the Gurgaon II dream to come true. He also said that the NPR side had more problems, as land acquisition had not taken place in some areas.

A very interesting point that came out is that both Gurgaon I and II could be severely impacted by the Delhi Master Plan. Sam Chopra, CEO Remax, said that the Delhi Master Plan could have an impact on the demand - both in Gurgaon I and II - as it will release large chunks of land in Delhi for construction. He currently prefers the Gurgaon-Faridabad Road projects, that are progressing well, and have a low FAR.

Devinder Gupta fully agreed, and opined that there were around 5,000 farmhouses in Delhi, and this land could be available for construction, if the Master Plan comes into force soon. He also opined that there were too many new builders in Gurgaon II, and buyers should do a lot of research before investing.

A top destination in Gurgaon II is seen as Sectors 114 and 115 – comprising Residential and Institutional areas.

Real Estate Regulatory Bill: Almost all the panelists were in favour of the proposed Real Estate Regulatory Bill, as it would bring about more transparency and accountability in the system. Jayashree Kurup said that this Bill streamlines the function of the builders and the various intermediaries, thus helping the buyers most. Sharma opined that it would prevent the one-sided Buyers Agreement that takes place these days - and on the basis of which builders can promise a lot, while they may not do anything in return. There are one-sided, restrictive and unfair  clauses. Devinder Gupta opined that this will help the buyer know what he is buying, and the actual status of the property legally. Sam Chopra was of the view that every industry needed a regulator, and it would be better that they had one in real estate soon.

However, the majority of the panelists opined that it would be not possible for this Bill to become a reality before the 2014 elections. When asked why, the answer was that political parties needed money from builders; and if everything become transparent, it would be difficult for them to find finance.

Handing over colonies: Friday Gurgaon asked both DLF and Ansals whether they intended to hand over their colonies to the MCG, for maintenance. Ansals replied assertively on the issue, and said that they have initiated talks with the government, so that these colonies could be handed over to MCG/HUDA. Goyal of Ansals said that the residents and RWAs want that the colonies should be maintained by the government agencies, and Ansals also believe in the same. “The role of the builder is to build and move on. Let the people and the government take care of the on-going operations”, he said The DLF response was in the affirmative, but more muted. DLF likes to keep control of the colonies, supposedly due to the lucrative Institutional Areas. In commercial areas, DLF also wishes to be a lessor, not a seller. Prashant Dhar, GM Marketing DLF, said that they would are fine with RWAs taking care of the maintenance, as they are democratic bodies representing the residents. “We believe in creating value and satisfying the buyer. DLF will uphold the interests of the residents”, he said.

It seems that the Millennium City will continue to be a Real Estate magnet, inviting investment from across the country - and even abroad; and that property prices in Gurgaon will keep on rising, despite already being at stratospheric levels. The reason being, say experts, the large number of investors in Gurgaon who are ready to take the risks, knowing the huge profits they can make if they bet right. In addition, the parallel economy is working overnight to invest in this Real Estate industry. A large amount of political money is also pouring into the Sector – which ensures liquidity, and keeps the laws builder- and investor-friendly.

The Real Estate players in Gurgaon believe that they can defy logic.  There is phenomenal confidence in the demand, and in the capacity of players to hold on – for ever; enough money has been made for generations. They will not, and cannot afford to, blink. In any such situation, the crunch, when it comes, would be met with disbelief



How the panelists define themselves:

All the panelists were asked an interesting question, as to how they defined themselves, and represented the same to buyers. This question brought up answers that helped unravel many perceptions of the ‘industry’.

Annil Bedi of Apollo Realtors said that he represented himself as a property consultant - with his depth of knowledge of the industry. He said that having a longtime relationship with customers was key to success in the industry - that was based more on faith.

DLF’s Prashant Dhar said that they represented themselves as a brand that cared for the buyers, and believed in giving the best value. A large number of customers come to the company by themselves, looking for premium properties and values that DLF stands for.

Jayashree Kurup of Magic Bricks said that they represent themselves as a real estate exchange, which has space for all the stakeholders. “We act as intermediaries, bringing together the buyer and the seller at one place. There is space for builders as well, to complete the exchange”, she said.

Devinder Gupta, in his usual style, said that he is a hardcore broker, with a nose for being at the right place, at the right time - to strike a deal. “Brokers always try to sell a product that will earn them money. However, I try to balance my own interests with that of buyers/sellers, so that good relations remain intact”, he said.

Sam Chopra, CEO Remax, said that they were a global brokerage company that was into total property transactions and advisory. Right now they are into transactions, and bring to the table local knowledge combined with standardization - that is needed for a business to take shape in a proper manner. “We have 100 affiliate offices  in 47 cities in the country right now”, he revealed.

CBRE’s Manish Kashyap said that they were a broking company with a large footprint - but many times the customers saw them as consultants. “The brand name plays an important role in the market for us, as most of the clients who come to us know who/what they are dealing with. With demands becoming more specific, people are now coming to us in Delhi even for project management”, said Kashyap.

Ansals’ Rakesh Goyal is proud of the brand and the reputation of the firm that has been building in Gurgaon since the eighties. Ansal is catering to the middle classes, and any one who wants to buy a plot or apartment knows that their property is safe with the Company.

Rajan Chanana said that he preferred to call himself a consultant, and to deal with a set of clients who understood his language and style of operation. “I prefer clients who come by reference, so that we can do business with ease”, he asserted.

Sonia Vaid, a research associate, said that she also prefers to call herself a consultant, as this portrays her as someone with more knowledge - an informed person.

Sanjay Sharma of Qubrex opined that he preferred to call himself a real estate consultant, who values honesty, truth and transparency with customers. “I promise only if I can deliver; and then I ensure that I deliver”, he said.



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